Question: This is question 19 from Chapter 1 Corporate Finance 4th Edition (Berk/DeMarzo) Please explain how to get the answer Suppose the following orders are received

This is question 19 from Chapter 1 Corporate Finance 4th Edition (Berk/DeMarzo) Please explain how to get the answer

Suppose the following orders are received by an exchange for Cisco stock:

Limit Order: Buy 200 shares at $25

Limit Order: Sell 200 shares at $26

Limit Order: Sell 100 shares at $25.50

Limit Order: Buy 100 shares at $25.25

a. What are the best bid and ask prices for Cisco stock?

b. What is the current bid-ask spread for Cisco stock?

c. Suppose a market order arrives to buy 200 shares of Cisco. What average price will the buyer pay?

d. Afterthemarketorderin(c)clears,whatarethenewbestbidandaskprices,andwhatisthe new bid-ask spread for Cisco?

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